Is Bitcoin really the revolutionary currency it's made out to be?
As you probably didn't know, I'm intrigued by digital currencies, Bitcoin in particular. I have been watching Bitcoin for quite a while, not from the beginning, but long enough to witness the recovery after the first crash and the ups and downs of the 2013 Bitcoin Bubble. One thing though, that repeatedly got on my nerve was people who kept advocating that Bitcoin was very revolutionary and even going as far as to make the comparison, 'Bitcoin is to money as email is to post'. I'm sure you have an image of these kind of people in your head, because I sure as hell do!
To me, hardcore Bitcoin advocates are the nerdy hacker types. They don't like governments (OK few do, but still, I don't make myself age quicker by stressing over it), smoke pot, have long hair and most importantly, want attention. Yes I said it; they're attention seeking brats. Luckily, it is very easy to spot them, despite their pathetic attempts to appear as normal online through propaganda poorly written.
BitHippies; All talk and no action
When you or me think of money, we think of the dollar, euro, pound etc; basically any money that a governement declares as legal tender, otherwise known as fiat currency. Now, how many times in your lifetime have you heard someone casually use the term 'fiat' whilst talking to you? Me, never. Well, before I heard of Bitcoin that is. Bitcoin advocates repeatedly knock down fiat currencies and refuse to call them anything other than that. Where you would say, 'I'm cashing in my Bitcoins for US Dollar', a Bitcoin advocate would say they're cashing them in for fiat. But of course, a Bitcoin advocate wouldn't do that, they fully support Bitcoin and use it for many of their daily purchases (sarcasm intended). I am already irritated by even typing the term fiat as I have associated the term with these Bitcoin rednecks. From here on in I will refer to fiat currency as USD/EURO or 'real money' since they are the two most used currencies amongst my readers. To save me time typing Bitcoin advocates all the time, I'll just call them BitHippies.
Ok, real money has it's problems, the main one being inflation. Could you imagine if there was a shortage of USD? Imagine if the US Governement couldn't print more money for some bizarre reason. Imagine the chaos. Yes ok, the value of your money would increase but at what cost? If the situation got so bad, your money could be increasing in value every hour (i.e. you can buy more today than you could yesterday with your five bucks). Now imagine if the banks couldn't lend out more than what they physically had in cash. The number of USD would be fixed but people still have to work, buy daily things and so forth. However, one reason most people work is to save. This not only puts pressure on the current supply, but consequently drives demand up as people still need to do their daily tasks. The result, your single dollar will be able to buy more things. After a while, people would begin to notice that the value is gradually rising. What would you do? I bet you'd try to get as many dollars as possible. You might cut back on spending to save as much as possible so that the value of your savings increases. Now, outside the US, people from other territories might begin to notice that their currency is buying less and less dollars every day. So what do they do? They buy loads of dollars in the hope of them rising in value so they can trade them back for their own currency. Outside investors couldn't give a monkey nuts about your country or the conseques of their actions. They're purely in it for profit. Unlike the outside investor, the only currency accepted in your country is the one become deflated. When the value gets very high, you may start to worry that the value may suddenly come crashing down. You may discuss your options with a partner, relative or a friend. The reality is though is that none of you hold a big enough share of the USD to make any dent by selling them. And so, if your smart you'll sell your USD for some other currency such as the Euro just before a crash in value. When the outside investors have made a satisfactory return, they will sell all their USD for their own currency. Then the downward spiral begins. This scenario is exactly what Bitcoin is and exactly what Bitcoin has experienced, not one, but TWO times.
Bitcoin is not, and will not succeed at becoming widely accepted as a payment method. Cyrtocurrencies or Digital currency similar to it might. Just because Bitcoin is the first does not mean it will succeed. Retailers that currently accept Bitcoin have to immediately sell the Bitcoins they receive for USD for fear that the value may go down. Namecheap.com is an example of an online vendor who accepts Bitcoin (they sell domain and hosting services). Why do they accept Bitcoin? Accoring to themselves, 'Namecheap continues to innovate and respond to threats and challenges in the online space. In the last 13 months, we donated over $100,000 to the Electronic Frontier Foundation to support online freedom. We consider ourselves the pioneers in the space in innovation and freedom.' In short, they don't necessarily support Bitcoin, but they accept it for two reasons; to show that they listen to customer requests and to highlight that there are other alternatives to paying for items and services other than Visa and PayPal.
At least with Dollar or Euro, we can roughly predict the value it will gain or lose in the next twelve months. Unfortunately, you cannot do this with Bitcoin, the main reason being the media and interference from outside parties. For example, BitHippies liked to think that the government were sitting around a conference table worrying over the 'success' of Bitcoin. Yes, I'm sure Obama really cared about a deflationary currency that not only has had security flaws in the way it's made, stored and sent, buts who's user base is tiny. If there's one thing to remember, it is that Bitcoin was purposely designed so that as more people wanted them, the value went up, and that is in my opinion it's biggest problem and will be the ultimate fall of the whole currency.